Seven Falls is a test case in failure

Published: Thursday, September 26, 2013 at 4:30 a.m.

Last Modified: Wednesday, September 25, 2013 at 3:44 p.m.

The saga of the bankrupt Seven Falls development may be drawing to a close in federal court, but not for Henderson County, which will continue to pick up the pieces into the foreseeable future.

As of Tuesday, all defendants except one — developer Keith Vinson — had pleaded guilty in a federal bank fraud case involving Seven Falls. Five of Vinson’s six co-defendants have agreed to provide evidence against him in a trial now set to begin the week of Oct. 7.

The defendants’ occupations include accountant, real estate appraiser, former bank president and investors/private money lenders. They face up to five years in prison and $250,000 in fines on charges that include conspiracy to defraud the government, bank fraud, misapplication of bank funds and withholding information.

Vinson blames the failure of Seven Falls, a 1,400-acre golfing community planned near Etowah, on the 2008 economic crash. He plans to argue that he was following the advice of his attorneys in at least some of the actions he took at Seven Falls and Queens Gap, a 4,000-acre resort in Rutherford County.

Federal prosecutors say Vinson and his co-defendants “devised and executed various schemes” to defraud and obtain more than $23 million. The government charges that “the conspirators would solicit loans secured by undeveloped Seven Falls lots from several federally insured banks. While the loans would appear to the banks as if they were traditional loans to individuals purchasing lots in Seven Falls,” they were in fact “short-term financing for Seven Falls and its developer, Vinson, who was unable to take out additional loans.”

Regardless of how the trial against Vinson turns out, we hope Henderson County officials remember this case the next time a developer comes before them seeking approval for a massive subdivision. One lesson to be learned is to assure that the bond required on such projects is adequate to cover the county’s cost should they, like Seven Falls, go belly up.

In July, county commissioners awarded a $346,000 contract to an Etowah company to halt severe erosion problems that have been ongoing for more than three years at Seven Falls. Last week, County Attorney Russell Burrell reported the work is more than halfway complete despite heavy rains in early August. The repairs include regrading washed out roads, cleaning out clogged sediment basins and installing silt traps and fences to prevent further damage.

So far the work has cost $7,000 less than expected. But county officials are not sure if the approximately $5.6 million in remaining bond proceeds will be enough to cover the costs of completing roads, water, sewer and other utilities, as originally promised by the developer.

When Seven Falls was first proposed, some residents raised alarms about potential costs of the project to the environment and taxpayers. In addition to assuring that bond proceeds are adequate, county leaders should in the future consider very large projects of this type with an eye toward worst-case scenarios. Seven Falls has given us a test case by severely testing the county’s ability to pick up the pieces when a major project fails.

<p>The saga of the bankrupt Seven Falls development may be drawing to a close in federal court, but not for Henderson County, which will continue to pick up the pieces into the foreseeable future.</p><p>As of Tuesday, all defendants except one  developer Keith Vinson  had pleaded guilty in a federal bank fraud case involving Seven Falls. Five of Vinson’s six co-defendants have agreed to provide evidence against him in a trial now set to begin the week of Oct. 7.</p><p>The defendants’ occupations include accountant, real estate appraiser, former bank president and investors/private money lenders. They face up to five years in prison and $250,000 in fines on charges that include conspiracy to defraud the government, bank fraud, misapplication of bank funds and withholding information.</p><p>Vinson blames the failure of Seven Falls, a 1,400-acre golfing community planned near Etowah, on the 2008 economic crash. He plans to argue that he was following the advice of his attorneys in at least some of the actions he took at Seven Falls and Queens Gap, a 4,000-acre resort in Rutherford County.</p><p>Federal prosecutors say Vinson and his co-defendants devised and executed various schemes to defraud and obtain more than $23 million. The government charges that the conspirators would solicit loans secured by undeveloped Seven Falls lots from several federally insured banks. While the loans would appear to the banks as if they were traditional loans to individuals purchasing lots in Seven Falls, they were in fact short-term financing for Seven Falls and its developer, Vinson, who was unable to take out additional loans.</p><p>Regardless of how the trial against Vinson turns out, we hope Henderson County officials remember this case the next time a developer comes before them seeking approval for a massive subdivision. One lesson to be learned is to assure that the bond required on such projects is adequate to cover the county’s cost should they, like Seven Falls, go belly up.</p><p>In July, county commissioners awarded a $346,000 contract to an Etowah company to halt severe erosion problems that have been ongoing for more than three years at Seven Falls. Last week, County Attorney Russell Burrell reported the work is more than halfway complete despite heavy rains in early August. The repairs include regrading washed out roads, cleaning out clogged sediment basins and installing silt traps and fences to prevent further damage.</p><p>So far the work has cost $7,000 less than expected. But county officials are not sure if the approximately $5.6 million in remaining bond proceeds will be enough to cover the costs of completing roads, water, sewer and other utilities, as originally promised by the developer.</p><p>When Seven Falls was first proposed, some residents raised alarms about potential costs of the project to the environment and taxpayers. In addition to assuring that bond proceeds are adequate, county leaders should in the future consider very large projects of this type with an eye toward worst-case scenarios. Seven Falls has given us a test case by severely testing the county’s ability to pick up the pieces when a major project fails.</p>